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Tag Archives | Gold

The economic doomsters and investment advisers are engaged in a collective hallucination when they see growing value in gold.

Quick, check out this hot investment tip! For decades now, the Federal Reserve has been suppressing the true value of gold to keep its prodigious impact out of the market, which is currently dominated by fiat currencies like the dollar and light-speed binary code transactions like high-frequency trading. If you stripped away the Fed’s continuing manipulation, gold’s free-market value, currently hovering around $1,000 per ounce, would increase by multiples. Wait, are you yawning? Why are you leaving?

Here’s why: This isn’t news. The Federal Reserve, along with investment banks, hedge funds, governments and even you (yes, you), have not been just manipulating the so-called real value of gold and other financial instruments for decades, you’ve also been manipulating reality itself for centuries. Because gold is just chemical element, or a precious metal as it is called in the business, which means you can’t eat, grow or use it to power your house or car.

You can almost predict the oft-repeated explanations the pundits offer up every time the precious metals behave irresponsibly.

The trouble with being a contrarian is that you can never be quite contrarian enough. We began having doubts about the ‘feds inflate…gold soars’ hypothesis last year. It was too easy…too obvious. And if it were that easy to inflate a nation’s currency, how come the Japanese couldn’t get the hang of it in the ’90s?

Inflation, yes…but not for a while. And gold? Well, we are in it for the long run. In the short run, anything could happen.

To clarify our view on gold, The Daily Reckoning is not bearish on the metal. It is not bullish on the metal either. It is buggish. We are gold bugs. In the long run, gold will retain its value. Since that’s all we ask of it, we are always satisfied. Even if it is down in the short run – and it went through an 18-year down cycle from 1980 to 1998 – it will come back in the long run.

With the value of gold on the rise, Jon Stewart was determined to get to the bottom of what may have caused the increase. The likely fanner of these flames: yep, Glenn Beck.
After noting that gold goes up when people are panicked or concerned, Stewart sat back and enjoyed the greatest hits from "Beck's hour-long nightly fear-cast." That alone wouldn't be enough to credit Beck for initiating this gold rush, but his role as spokesman for Goldline, an internet site where you buy gold, surely sealed the deal. Stewart recapped:
"Glenn Beck is paid by Goldline to drum up interest in gold, which increases value during times of fear; an emotion reinforced nightly on Fox by Glenn Beck."
Calling Beck's ethics into question, Stewart finished by stating, "You can't spell 'gold' without G-O-D."

With everyone from Alex Jones to the elite investors on Wall Street loading up on gold or shares in gold mines and other related ventures, are we witnessing the same sort of stampede into the ‘must-have’ investment choice du jour that created the recent credit and housing bubbles, or is this really where the smart money is going? This Marketwatch report suggests the latter, but I wonder if we’ll know when the smart money gets out…

Gold has long been favored by a fringe of the investment world, but this year some of the world’s leading hedge-fund managers have loaded up on the precious metal amid concern government efforts to avoid another Great Depression that could undermine major currencies and fuel rampant inflation.

“I have never been a gold bug,” Paul Tudor Jones, chairman of hedge-fund giant Tudor Investment Corp., wrote in an Oct. 15 letter to investors. “It is just an asset that, like everything else in life, has its time and place.

I’m not sure I really believe this, but the Telegraph is one of the more serious UK newspapers:

Global gold production is in terminal decline despite record prices and Herculean efforts by mining companies to discover fresh sources of ore in remote spots, according to the world’s top producer Barrick Gold.

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

“There is a strong case to be made that we are already at ‘peak gold’,” he told The Daily Telegraph at the RBC’s annual gold conference in London.

“Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue.

There is an old and apocryphal saying that “a good handgun is worth an ounce of gold” and it turns out to be true — at least it has for the past 136 years.

Because it is basically unchanged after 136 years of continuous production and because there is a healthy, liquid market for it, a good example of this case can be made by tracing the price of “The Gun that Won the West,” the Colt Single-action Army revolver. The venerable Peacemaker turns out to be a better gauge of inflation than gold is and a better investment. President Ronald Reagan even named a missile after it.

The correlation of gold and guns can be traced back at least to 1873 when Colt’s Manufacturing Company of Hartford, Conn., introduced the most technologically advanced handgun of its time, a six-shot revolver that used metallic cartridges. The Army adopted it as its standard side arm, a position it held until 1892.

I just read a very interesting new article by columnist Peter Brimelow in CBSMarketwatch in which he discusses Mary Anne and Pamela Aden’s Costa Rica-based Aden Forecast, a sort of finance newsletter/tipsheet. They are famous for being right about gold in the ’70s but in fact they have a pretty good track record since then too.

The really interesting part is this: while some “experts” are saying that gold prices, now well over $1,000 per ounce, have risen too high already, the Adens are saying that we ain’t seen nothin’ yet. Brimelow explains:

About gold, the Adens note that “gold’s peak in 1980 at $850 is the equivalent of about $2400 in current dollars. Gold has not even approached that level yet and the situation is far more serious now than it was then.”

They conclude:

“The focus now is on the next phase of the current rise. If we continue to use proportions, the bull market’s second rise from 1976 to 1980 gained 750%.